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Royal Bank of Scotland is facing a substantial damages bill after a US court ruled it engaged in “enormous deception” selling mortgage-backed securities along with Japanese investment bank, Nomura.

In a 361-page ruling, District Judge Denise Cote said the case, while complex, boiled down to a simple question: “Did defendants accurately describe the home mortgages in the Offering Documents for the securities they sold that were backed by those mortgages?”

It adds: “Following trial, the answer to that question is clear. The Offering Documents did not correctly describe the mortgage loans.

“The magnitude of falsity, conservatively measured, is enormous.”

Of the seven securitisation deals raised in the case, RBS underwrote four valued at around $2 billion.

Internal emails sent between the banks described some loans included in the securities as “crap”.

Evidence had shown one banker had taken just over an hour to conduct due diligence on 33 loans, some of which were missing documentation which was “material to both credit and compliance”.

RBS was also found to have commissioned “drive-by” appraisals on properties for a sample of loans selected for securitisations.

The securitisation deals were found to be made up of between 45 per cent and 59 per cent “materially defective” mortgages.

The ruling found in favour of the plaintiffs, the US Government-Sponsored Enterprises, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which are now controlled by the Federal Housing Finance Agency (FHFA) after being bailed out by the US government.

FHFA has to date sued 19 financial institutions in relation to mis-sold mortgage-backed securities and has secured nearly $18 billion in settlements to date, with this case, known as the 'Nomura Action', the first to reach trial stage.

RBS Securities, known as Greenwich Capital Markets at the time of the transaction, was a co-defendant having underwritten four of the seven securitisations raised in the case.

FHFA will report back to the court on Friday with an updated damages figure, which could run to more than half a billion dollars.

RBS has declined to comment and Nomura has signalled it intends to appeal the decision.